I’d buy these 6% dividend yields as stock market volatility continues

These are uncertain times. The economic, political and social consequences of the coronavirus outbreak — even in the short term — are still as clear as mud.

The tension continues to reverberate across financial markets. One day, share pickers are cheering signs of slowing Covid-19 infection rates and talk of lockdowns being eased. The next, sees bad pandemic-related news released alongside bouts of shocking economic data. Yesterday, news emerged that US industrial production in March had collapsed at its sharpest pace since 1946!

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Share pickers who’ve bought quality stocks should see their investment portfolios bounce broadly back over the long term. It’s still not helpful for the nerves, of course. And it comes as little consolation for stock owners who had plans to cash in their holdings now, or in the near future.

Make it count with these 6% yields

Why not play this intense volatility to your advantage though? Trading volumes continue to boom as traders frantically buy and sell with every little change on the news ticker. It’s a trend that’s boosted business at Plus500, a platform operator specialising in CFDs, of late.

This particular share has surged more than 60% in value over the past month. Compare this with, say, the 8% gain that the broader FTSE 100 has reported. Plus 500 isn’t the only trading house to enjoy stunning gains however. IG Group’s risen a decent 16% over the same period.

What also brings these shares together is the promise of big dividend yields. The probability that they can keep paying ultra-generous rewards to their shareholders is, of course, particularly desirable. That’s because dividends are being slashed across the London stock market (around a third of Footsie-listed firms have already swung the axe).

So what are these yields? Well, at IG Group, the forward reading sits at 6.2%. Meanwhile, Plus500 boasts a figure of 6.6%.

But forget about their value from an income perspective for a moment. Both shares also offer plenty of bang for your buck from an earnings perspective. IG sports a corresponding price-to-earnings (P/E) multiple of 14.1 times and Plus500 carries a bargain-basement ratio of 6.8 times.

Before you go…

These firms are too cheap, given their bright profits outlook for the short-to-medium term, I believe. And I’d happily buy them for my ISA.

While I’m at it, I’d also load up on Vectura Group (LSE: VEC). The healthcare play has also exploded in value of late, up almost 50% over the past month. And yet it still looks very reasonable valued, the share sporting a forward P/E ratio of 17 times.

Look, this isn’t cheap on paper. But when you consider the essential nature of its products — Vectura provides a variety of services to help bring inhaled drug products to market — and therefore its brilliant earnings visibility, I consider this to be a pretty small premium.

The small-cap noted last month that “no signals of diminished demand for these services have been noted” following the Covid-19 outbreak. I’d happily load this share into my investment portfolio, along with those 6% dividend yields.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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